Customer-related costs

Additionally, drivers want to get more involved with customer relations, cost reductions, safety, equipment spec ing and purchases, maintenance and repair, training, sales, and recruiting. These interests of drivers indicate a need to be more fully involved and integrated into the company as equals with other employees. ... 

What sort ot costs should be taken into account in this type ot analysis Figure 3.11 presents a basic model that seeks to identity only those customer-related costs that are avoidable (i.e. it the customer did not exist, these costs would not be incurred). 

In essence, mass customization attempts to bring customers and company capabilities closer together. With the Internet, customers and providers in different stages of production can be connected at multiple levels of the Web. How this new capability will be utilized is still at a very early stage. For examples, customers can be better informed about important features and the related costs and limitations. Customers can then make educated choices in a better way. In the meantime, through these interactions the company will then be able to acquire information about customers needs and preferences and can consequently build up its capabilities in response to these needs. Therefore, e-commerce will be a major driving force and an important enabler for shaping the future of mass customization. 

One such cost involves driver knowledge of the area in which he or she is providing service. A driver who is familiar with the road network and traffic conditions in his service area is likely to be more efficient than a driver for whom the delivery area is relatively new. A second, related cost involves the development of business relationships. For many service providers, an important goal is to achieve regularity and personalization of service by having the same driver visit a particular customer every time that customer requires service. 

We can expand our model for multi-echelon supply chains. Instead of dealing with facility customer relations, we can observe manufacturing facility, warehouse, and customer (i.e. retailer store) relationships. Here we need to re-define our variables, parameters and introduce new variables. Let tMW be transportation cost from manufacturing facility to warehouse, tWC transportation cost from warehouse to customer, Wv warehouse variable cost, Wf warehouse fixed cost, Mv manufacturing facUity variable cost, MK manufacmring facility capacity, WK warehouse capacity. New variable Zjj is the amount of shipments from manufacturing facility s to warehouse i. 

Arrange the following concerns in order of importance— in your opinion, for your furnaces Cleanliness Customer relations Employee relations Energy conservation Fire Prevention Fuel cost Furnace productivity Personnel... 

There are several companies that face such a transition, especially during establishment of a core carrier program. There is an important difference between centralization of transportation and coordination of transportation. Under a centralized system, a central entity decides how to handle all loads. Under a coordinated system, the load control center offers possible delivery times and defines associated costs, but the individual locations make the final decision. Thus in a coordinated system, individual profit centers decide on the tradeoff between customer service and related costs and revenue benefits. 

The identificatimi of the relevant costs is also an important issue. Eor production planning, (Mie typically needs to determine the variable pro-ductimi costs, including setup-related costs, inven-tory holding costs, and any relevant resource acquisitimi costs. There might also be costs associated with imperfect customer service, such as when demand is back-ordered. A planning problem exists because there are limited production resources that cannot be stored from period to period. Choices must be made as to which resources to include and how to model their capacity and behavior and their... 

It is also required to predict costs related to the transportation of a claimed product, customer compensation cost during a repair (e.g. costs to provide a reserve product to the customer during a repair), administration costs or other complaint settlement-related costs. It is necessary to predict the mean value of additional costs - [Q]. 

The industry operational delivery systems of supply networks, products/services/after-sales services, partnering Web sites, distributed databases, stored and mined business information, staff, value additions, and fee-for-service activities are matched against customer-related requirements concerning services and/or product delivery. Fast, accurate, consistent, responsive, empathetic, quality-assured, technically supported, trained delivers, and low-cost options are included. 

Customer relations — Customers perception of your drivers and organization may be negatively impacted by a high accident rate. If the customer feels its cargo is not safe with you, other carriers may be considered. What is the cost of losing a customer ... 

Note that in Model D, as opposed to Model T, the wholesaler bears all the inventory-related risk. The retailer still incurs all the customer aequisition costs that will benefit not only him, but also the wholesaler. Hence, none of the players has an incentive to behave system-optimally, as we will show later,... 

However, what about the costs to train and compensate a replacement employee, repair damaged property or equipment, downtime of equipment, investigating the incident, and implementing corrective actions Even less apparent are the costs related to product schedule delays, added administrative time, lower morale, increased absenteeism, pain and suffering of the employee, and impaired customer relations. These are the indirect costs and, as such, have been described by many professionals as an iceberg. You cannot see the bottom until it is too late. We will discuss these costs later in more detail [3]. 

The appropriate measure should be profit rather than sales revenue or volume. The reason for this is that revenue and volume measures might disguise considerable variation in costs. In the case of customers this cost is the cost to serve , and we will later suggest an approach to measuring customer profitability. In the case of product protitability we must also be careful that we are identifying the appropriate service-related costs as they differ by product. One of the problems here is that conventional accounting methods do not help in the identification of these costs. 

Loyalty programs provide rewards to customers for repeat purchase. Companies build networks of customers for exchanging product-related information and to create relationships between customers and the company or its brand. These networks and relationships are called communities. The goal is to build an environment which makes it more difficult for the customer to leave the family of other customers who also purchase from the company. Examples of CRM-based measures are customer acquisition cost, conversion rate from browsers to buyers, retention rate, same-customer sales rate, loyalty measures, and customer-share (proportion of a customer s business satisfied). 

Delivery speed is too high, resulting in increased costs for the customer because products arrive too early. This increases handling, storage and related costs. 

Amazon sells books, music, and many other items over the Internet and is one of the pioneers of online consumer sales. Amazon, based in Seattle, started by filling all orders using books purchased from a distributor in response to customer orders. As it grew, the company added warehouses, allowing it to react more quickly to customer orders. In 2013, Amazon had about 40 warehouses in the United States and another 40 in the rest of the world. It uses the U.S. Postal Service and other package carriers, such as UPS and FedEx, to send products to customers. Outbound shipping-related costs at Amazon in 2012 were over 5 billion. 

Do not ignore quality-of-life issues. The quality of life at selected facility locations has a significant impact on performance because it influences the available workforce and its morale. In many instances, a firm may be better off selecting a higher-cost location if it provides a much better quality of life. Failure to do so can have dire consequences. For example, an aerospace supplier decided to relocate an entire division to an area with a lower standard of living in order to reduce costs. Most of the marketing team, however, refused to relocate. As a result, customer relations deteriorated, and the company had a very difficult transition. The effort to save costs hurt the company and effectively curtailed the firm s status as a major player in its market (Harding, 1988). 

At this stage, we have seen that even in the absence of inventory-related costs, quantity discounts play a role in snpply chain coordination and improved supply chain profits. Unless the manufacturer has large fixed costs associated with each lot, the discount schemes that are optimal are volume based and not lot-size based. It can be shown that even in the presence of large fixed costs for the manufacturer, a two-part tariff or volume-based discount, with the manufacturer passing on some of the fixed cost to the retailer, optimally coordinates the supply chain and maximizes profits given the assumption that customer demand decreases when the retailer increases price. 

---